Container shipping lines could hold back on further rate increases for shipments to North America after a bill was submitted to US Congress to strengthen the regulation of many international shipping practices, a shipowner source said.
The Ocean Shipping Reform Act of 2021 was submitted in the House of Representatives on Aug. 10. If signed into law as written, the legislation would require shipping lines to certify that detention and demurrage charges comply with federal regulations and prohibit them from declining US export cargoes “unreasonably”, a determination to be made by the US Federal Maritime Commission, or FMC.
A representative for an Asia-based shipping line said the company has no plans to file for further general rate increases or new surcharges, while US regulators are acting on complains from US importers and exports.
“We’ll have to wait and see what they do. It could be very difficult for carriers,” the shipowner source said. “The FMC is on the warpath right now. They weren’t when carriers were losing money, but now they sure are.”
Congress responds to 170% rate increase since last year
Container freight rates to North America from Asia and Europe are at all-time highs as record US import volumes for goods overwhelmed US port infrastructure and outstripped the carrying capacity of shipping lines, creating congestion and delays across the supply chain.
Platts Container Rates 5 — North Asia to North America — was assessed at $8,900/FEU on Aug. 11, up by 170% from July 2020, which was around the time that demand for space on containerships staged a staggering rebound from the earlier depths of the coronavirus pandemic as US consumers responded to community lockdowns by increasing spending on goods largely made in Asia.
US container import volumes are expected to hit an all-time high at 2.37 million twenty-foot equivalent units, or TEUs, in August before steadily declining to 2.02 million TEUs in December, according to the National Retail Federation.
“I told management to expect another big rate increase for Aug. 1 which didn’t happen, although that is a good thing,” a US-based shipper of goods from Asia to North America said. “Regulators might have the shipping lines worried at this point. The FMC really does have power to do something as long as Congress takes action.”
Multiple shipping lines nominated trans-Pacific rate increases and new surcharges in the range of $1,000-$5,000/FEU for early August, but rates from North Asia to North America only increased by $300/FEU and $500/FEU from Aug. 1 to the East and West Coast of North America, respectively, according to S&P Global Platts data.
Trade groups of shippers and shipowners weigh in
The World Shipping Council, or WSC, a trade association representing the liner shipping industry, said trying fix contagion across the supply chain by only regulating the ocean shipping sector was “doomed to fail.”
“This approach will not improve supply chain performance, and it risks undermining the regulatory and market structure that has served the nation’s international trade well for many decades,” the WSC said in a statement following the bills introduction in Congress. “It is possible to make the situation worse, and this bill would do just that.”
But the bill was applauded by many US importers and exporters including the American Apparel and Footwear Association, or AAFA, a trade group representing garment manufacturers and their suppliers.
“The Ocean Shipping Reform Act addresses many issues that have been a thorn in the side of American business for years, and comes at a time when a shipping crisis is stymieing our nation’s economic recovery,” said AAFA President Steve Lamar. “This bill will go a long way in preventing future shipping crises.”